Advocates of Floating Rate Suggested It Is Favorable for Economies

question 10

Multiple Choice

Advocates of floating rate suggested it is favorable for economies for all of the following reasons EXCEPT

• A) it discourages attack from foreign exchange speculators because of the fact that exchange rate adjustment is immediate.
• B) it helps stabilize the shock effect on unemployment in case of economic changes such as a fall in export demand.
• C) it automatically matches the domestic inflation with ongoing foreign inflation.
• D) it gives every country the opportunity to guide its own monetary conditions at home.
• E) it brings the LR exchange rate to the level predicted by PPP without government policy decisions.

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Definitions:

Vertically Integrated

A business structure in which a company controls multiple stages of the production process, from raw materials to final product delivery.

Effective Utilization

The extent to which a company or system makes optimal use of resources, time, and capacity.

Defective Units

Products that fail to meet quality standards and are not fit for sale or use as intended.

Bottleneck

A machine or some other part of a process that limits the total output of the entire system.